Show me the Money! Targeting the 50+ Market

In developing and executing direct marketing campaigns for the 50+ market, one common question frequently arises – “Is it better to target seniors based on income or wealth?” There are fundamental differences between income and wealth, and which of these indicators can provide the best ROI in direct marketing targeting efforts depends on many factors.

As director of data analytics at DMW Direct, a direct response advertising agency with expertise in marketing to the 50+ generation, I am often asked which demographic variable best demonstrates an ability to predict certain response or purchase. Marketers often wonder if the product they are advertising is targeted to the correct audience, and one common worry is whether the product is focused on the correct income level. My well-developed and carefully prepared answer is typically a very disappointing one: “It depends!”

Both income and wealth can typically be obtained via data aggregators that predict the two items based on a prospect's ZIP code, purchase history, home value and other publicly available data. But which indicator is best for you? Again…it depends!

In order to determine whether income or wealth is the best for your particular direct marketing effort, let's see what distinguishes the two.

Income is a measure of cash flow, representing the amount of cash or assets that an individual has available over a set period of time. Income is typically a short-term gauge of purchase power and gives a pretty good idea of how solvent or liquid a business or individual is. Income includes items such as interest and dividends from investments, wages, salaries, bonuses from jobs and payments from retirement or pension plans.

Wealth or net worth is a measure of assets accumulated (minus debts) and controlled by an individual or business. Wealth is a longer-term gauge of purchase power, and assets that contribute to a person's net worth, such as real estate or investments, are not always liquid or easy to convert to cash for purchases.

Depending on what product or service you are marketing, each will have a different impact on your targeting efforts. Consider the lifetime frame of the product you are selling and try to match it up with the correct indicator.

For example, if you're marketing life insurance, real estate, investments or are in fundraising efforts, then measures of net worth are likely more applicable to you. These are all long-term products that are oriented toward acquiring or protecting assets and have multi-year implications for your customers. They are products where an individual will be willing to dip into their assets/savings.

On the other hand, if you're marketing retail goods, or insurance products that are renewed annually, you should look at income, a short-term indicator of how much cash your prospects or customers have available to them.

First and foremost, we should not assume that seniors with a high net worth are willing to part with it. Most people in the 50+ segment plan to live at least another 40 years. (I simply need to talk to my parents to confirm this). Many have carefully planned their investments to ensure that they can live comfortably and maintain an active lifestyle, yet still have enough money to pass on to children and grandchildren if needed. They have carefully crafted their nest eggs, and are not always so willing to part with them.

On the other hand, items such as income purchase behavior give an idea about how much an individual can afford and what products they can and are buying. Unless your product is specifically geared toward or affects someone's net worth (mutual funds or retirement accounts, for example), then you should focus on the short-term indicators as a way to target this segment.

So, which indicator is going to be a better tool to help you target, segment and ultimately predict the behavior of your customers? First, be mindful of what industry you are in and what kind of product you are marketing, and think about which measure is more applicable to your efforts. Second, test both and let back-end analysis verify your initial thoughts. Either indicator, or possibly both, could be valuable in your targeting efforts, especially when certain segments may be low income, high net worth or vice versa. Information is a low-cost investment that can yield valuable insights, so never be afraid to use it as a tool in targeting customers.

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